Motorola Profit Beats Estimates; Raises Forecast

Motorola reported on Thursday its first profit in 2007 and gave an outlook that beat Wall Street expectations, in a sign the mobile phone maker has started to turn around its business.

AP

Motorola Razr

Third-quarter profit still fell 94 percent as the company lost mobile phone market share in Asia. But Motorola's shares rose as much as 5 percent as investors took heart from the results, which came after two quarters of losses.

American Technology Research analyst Mark McKechnie said Motorola had cut costs faster than expected, but that investors would be anxious to see more improvements in its handsets.

"They're doing what they said they were going to do. They're doing good but not great," he said. "It's decent progress for a company in turnaround mode."

Motorola has been losing market share to the largest mobile phone maker Nokia and to Samsung Electronics, which took Motorola's No. 2 ranking in the second quarter. It also faces competition from Apple's iPhone.

Motorola's third-quarter net profit was $60 million, or 3 cents a share, compared with $968 million, or 39 cents a share, in the year ago quarter.

Excluding discontinued operations and charges from job cuts and asset writedowns, Motorola's profit was 6 cents a share, ahead of the average analyst estimate of 4 cents a share, according to Reuters Estimates.

"Our third quarter can be characterized by one word, progress," said Chief Executive Ed Zander on a conference call with analysts. "We also recognize there is a lot more work to be done."

Revenue fell 17 percent to $8.8 billion, in line with average analyst estimates, according to Reuters Estimates.

Bullish Outlook

It forecast fourth-quarter earnings per share from continuing operations of 12 cents to 14 cents, excluding any reorganization charges or other items.

Analysts had on average expected earnings of 11 cents per share for the fourth quarter, according to Reuters Estimates.

Executives on the call also said the company expects to see revenue and bottom line improvements in its mobile devices business in the fourth quarter.

The handset business posted an operating loss of $138 million compared with a profit of $843 million in the year ago quarter. Mobile phone revenue fell 36 percent to $4.5 billion.

Motorola shipped 37.2 million cell phones in the quarter, giving it an estimated market share of about 13 percent. Estimates ranged from 35 million to 38 million from three analysts contacted by Reuters.

While it lost market share in the Asia Pacific region, including India, it regained its lead in Latin America and kept its lead in North America, executives said.

Asked about plans for share repurchases, Motorola's Chief Financial Officer Tom Meredith hinted that the company could have some news on this in coming weeks.

He noted the company had about $4 billion left to spend on its roughly $11 billion share repurchase plan.

The company ended the quarter with 67,000 employees, down from 72,000.

Motorola said revenue for its set top box and network equipment business increased 6 percent from the year-ago quarter. Its enterprise business posted a 47 percent revenue increase to $2 billion.

Shares of Motorola, which has been criticized for failing to come up with a strong successor to its flagship Razr phone, had lost almost a third of their value in the last 12 months.

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Shares of Motorola rose 4 percent, or 77 cents, to $19.32 in early trading on the New York Stock Exchange, after rising to as high as $19.45 shortly after the opening bell.